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Technology Stocks : AUTOHOME, Inc

ATHM 20.93

-3.2%

Feb 3 3:59 PM EST

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To: IKM who wrote (971)	12/17/1997 3:02:00 PM
From: ERM	Read Replies (1) of 29970

I'm guessing that your cable operator is relatively small. The pricing you are being quoted, I suspect, is intended to turn you off. They're going after businesses first who can pay more and require less upfront CAPEX in the way of modem purchases. I also wonder where you are relative to an ATHM hub. The cost of transmission between your system and the ATHM backbone can be very high. Again, rather than saturate a T1 with residential traffic, the smaller operator will opt for utilizing that bandwidth for higher margin business customers. My point is that what is a problem for you as an ATHM customer is not necessarily bad as an ATHM shareholder since the business accounts are the real cream of this industry. Your ATHM prices will come down when a) there is some positive cash flow coming out of the commercial sector, or b) when modem prices drop, or c) when your system is sold (as it inevitably will be) to a larger MSO who can more easily absorb the CAPEX. Also, keep in mind that low residential pricing can actually cannibalize the business sector since it becomes harder to sell a telecommuting application package to businesses if their employees can get a similar service cheaper on their own.

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